Two weeks ago, while doing some docent work at a local preserve, I met a man who said he was a real estate appraiser in Scottsdale. He was having trouble with a client/mortgage broker on a loan to a real estate broker for purchase money. The listing price for the home was $210,000. It was on the market for hours when the buyer/broker offered $280,000. His intentions are to flip it. The appraiser can't support the offer price and fears not being paid, as the mortgage broker goes looking for another appraiser to make the deal work.
I know an escrow officer here who reports many transactions involving buyers who flip purchases for 200+ percent return on equity WITHOUT EVER HAVING MADE A MORTGAGE PAYMENT.
This market includes flipping at every stage and often by partnerships who make specialities of certain stages of development. Buy raw land, flip it to someone who is thinking of subdividing, flip it to a developer who sells clusters of lots to other partnerships, who get construction contracts, selling again to prospective house buyers to flip again, and on and on and on. I don't think this country has ever seen anything like what's happening in Maricopa County and other parts of Arizona. Locally, it's called the Los Angelization of the Phoenix area, or the Californication of Arizona.
Income ratios? Getting out'a hand, but as demonstrated by decades of higher prices in California, that measure does not mean we are near a correction. Vacancy rates? Surprisingly low, because anyone holding a house long enough to rent it, seems more than willing to subsidize the renter. In fact, rents are not going up in a way that's reflecting the higher real estate prices. Those increases are more on the order of the changing CPI nationally. Then, the population is growing too, but mostly among hourly wage earners, so there are plenty of renters.
I was a real estate consultant and valuations expert in the SF Bay Area for 30 years. I could always understand what was driving that market and it's many cycles over that time. Since moving here, I think I understand this Phoenix area market, too. It's called mania. |
